The government of Belize said that the IDB loan will assist Belize's public finances as it takes steps to improve its fiscal position and debt management.

To boost revenues, the government will introduce a new oil tax regime and implement a general sales tax. It will also proceed with an orderly liquidation of the loss-making Development Finance Corporation.

The loan will be disbursed in two tranches, the first one of $10 million and the second one of $15 million, as the Belize government goes forward with its reforms. The Ministry of Finance will be responsible for the program's execution.

The loan was granted for 20 years, with a five-year grace period and a LIBOR-based interest rate.

"Belize has made progress in addressing serious macroeconomic imbalances by following a homegrown strategy," the IDB said in a statement.

"Its authorities have expressed a firm commitment to maintaining stability through a comprehensive medium-term economic program, where reaching a cooperative agreement with private creditors on restructuring its external debt will be paramount," the IDB added.

The bank noted that fiscal belt-tightening measures already put in place by the government of Belize reduced the fiscal deficit from 8.7% of GDP in 2004 to 3.3% in 2005.

Last week, the government announces that it was seeking the approval of the Belizean National Assembly for the financial terms of an offer to exchange most categories of Belize's outstanding external commercial indebtedness for new US Dollar Bonds. The announcement was made shortly before international ratings agency Standard & Poor's revised Belize's foreign currency sovereign credit rating to selective default.